Factor/Style Investing

Factor Premia and Factor Timing: A Century of Evidence

We examine four prominent factor premia – value, momentum, carry, and defensive – over a century from six asset classes. The results offer support for time-varying risk premia models with important implications for theory seeking to explain the sources of factor returns.

Fixed Income

Looking Under the Hood of Active Credit Managers

We find that credit long/short managers tend to have high passive exposure to the credit risk premium. In contrast, we find that high-yield-focused long-only managers provide less exposure to the credit risk premium than their respective benchmarks.

Tax Aware

Should Taxable Investors Shun Dividends?

We evaluate the tax benefit of dividend avoidance for quantitative multi-style strategies and find that dividend avoidance generally reduces implementation efficiency, thus lowering expected pre-tax returns.

Machine Learning

Autoencoder Asset Pricing Models

We propose a new latent factor conditional asset pricing model, which delivers out-of-sample pricing errors that are far smaller (and generally insignificant) compared to other leading factor models.

ESG Investing

Hedging Climate Change News

We propose and implement a procedure to dynamically hedge climate change risk and discuss multiple directions for future research on financial approaches to managing climate risk.

Fixed Income

Give Credit Where Credit Is Due: What Explains Corporate Bond Returns?

We examine the risk and returns of U.S. corporate bond indices using a set of economically-motivated factors and find that options markets explain a great deal of credit returns.

Alternative Investing

Trends Everywhere

We provide new out-of-sample evidence on trend-following investing by studying its performance for 82 securities not previously examined and 16 long-short equity factors.

Factor/Style Investing

Factor Momentum Everywhere

Can individual factors be reliably timed based on their recent performance? This study of 65 widely-studied, characteristic-based equity factors aims to find out.

Equities

Forecasting the Distribution of Option Returns

We propose a method for constructing conditional option return distributions.

Market Risk and Efficiency

A Framework for Identifying Accounting Characteristics for Asset Pricing Models, with an Evaluation of Book-to-Price

We provide a framework for identifying accounting numbers that indicate risk and expected return.